Consideration and Adoption of Resolution No.  2015-12:  A resolution of the Council of the City of Flagstaff, Arizona declaring for purposes of Section 1.150-2 of the Federal Treasury Regulations, official intent to be reimbursed in connection with certain capital expenditures relating to the Road Repair and Street Safety Initiative. (Reimbursement resolution for the Road Repair and Street Safety Initiative).

In November 2014, Flagstaff voters approved Question No. 406 for the Road Repair and Street Safety Initiative (RRSSI)  transaction privilege tax (TPT).  As part of this question, $20 million dollars in debt to accelerate construction in the first seven years of the tax was approved.  This resolution allows the City to reimburse itself for expenditures made on behalf of this project before the financing is secured.

The expenditures for the various projects related to the RRSSI TPT will be reimbursed from future bond proceeds.  The bond will be paid back from the TPT proceeds.  A total of $20,000,000 in bonding was authorized in question 406.

COUNCIL GOALS:
Provide sustainable and equitable public facilities, services, and infrastructure systems in an efficient and effective manner to serve all population areas and demographics

REGIONAL PLAN:
WR.2.2 - Maintain and develop facilities to provide reliable, safe, and cost-effective water, wastewater, and reclaimed water services.
T.11 - Build and sustain public support for the implementation of transportation planning goals and policies, including the financial underpinnings of the Plan, by actively seeking meaningful community involvement.
T.11.5 - Promote effective intergovernmental relations through agreed upon procedures to consult, cooperate, and coordinate transportation related activities and decisions, including regional efforts to secure funding for the improvement of transportation services, infrastructure, and facilities.

YES.  November 4,  2014 Road Repair and Street Safety Initiative Election.

Approve the Reimbursement Resolution.
Do not approve the Reimbursement Resolution.

On November 4, 2014, a general election was held by the City of Flagstaff whereby the citizens authorized the Road Repair and Street Safety Initiative.  This is a 0.33 percent (%) transaction privilege tax for a 20 year period to be used exclusively to pay for street improvements and the ongoing preservation of street condition inside the City limits which include improvements to:

• adjacent curb, gutters, sidewalks, bicycle paths and
• pedestrian safety, transit facilities, and
• water, wastewater, and storm water utilities under or around these streets than need improvement or preservation and

pay for these improvements and preservation through borrowing in a principal amount not to exceed $20,000,000.

The work program is accelerated in the first seven years to be able to quickly advance road repairs on those streets in greatest need throughout  the city.  To accomplish this task, debt must be issued as the street/utility costs exceed the amount of RRSSI TPT revenue that will be generated in the same period. 

IRS regulations are very specific as to what capital expenditures are eligible for reimbursement.  These expenditures must be any cost of a type that is properly chargeable to a capital account (or would be or chargeable with a proper election) under general federal income tax guidelines.

The City is planning on issuing the $20 million dollars in new debt authorized in two series.  The first $10,000,000 is currently planned to be issued in either late 2015 or early 2016.  The second and final $10,000,000 is anticipated to be issued in 2018.  The timing for the second issuance will be dependent on the City work program and at what time the City needs the additional funds to pay for the projects.

The debt payments will be made from the RRSSI TPT.

This resolution allows capital project timing to not be hampered by the issuance of the related debt.

Empower - Approved by City voters on November 4, 2014.

 

Approve the Reimbursement Resolution

• Pros:  Allows the City the greatest flexibility in assuring expenditures are reimbursed and debt can be secured when most advantageous to the City.

Do not approve the Reimbursement Resolution.

• Cons:  The City would have to issue debt before the summer of 2015 to assure adequate funds are available to pay for the projects as currently planned.  As the City may issue debt earlier than necessary, additional interest charges could accrue.  In addition, the City could lose some economies of scale as the City generally tries to combine all offerings when viable.